Uniform and Simplified Trust Indenture Legislation

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					                    UNIFORM LAW CONFERENCE OF CANADA

                                     CIVIL LAW SECTION




    UNIFORM AND SIMPLIFIED TRUST INDENTURE LEGISLATION




                             Second Report of the Working Group
                 of the Uniform Law Conference of Canada, Civil Law Section.




Readers are cautioned that the ideas or conclusions set forth in this paper, including any proposed statutory
language and any comments or recommendations, may not have not been adopted by the Uniform Law
Conference of Canada. They may not necessarily reflect the views of the Conference and its Delegates. Please
consult the Resolutions on this topic as adopted by the Conference at the Annual meeting.




                                                                                    Winnipeg, Manitoba
                                                                                          August, 2011
          UNIFORM AND SIMPLIFIED TRUST INDENTURE LEGISLATION




                                        REPORT to the
                              Uniform Law Conference of Canada
                              (Civil Law Section) – August 9, 2011


Introduction

[1]    This report is submitted by the undersigned on behalf of the Working Group on Uniform
and Simplified Trust Indenture Legislation to summarize the status of proposed uniform and
simplified trust indenture legislation. This is the second report of the Working Group to the
Uniform Law Conference of Canada (“ULCC”).

Background

[2]    The Working Group tabled its first report (the “First Report”) to the ULCC on August
24, 2010 (a copy of which is attached as Schedule A).

[3]    One of the principal recommendations of the Working Group was that the Canadian
Securities Administrators should develop a uniform national instrument that would replace all of
the federal, provincial and territorial corporate law provisions governing the minimum
requirements of trust indentures. The Working Group’s recommendations were endorsed by the
ULCC in August 2010.

[4]    Based on the Working Group’s principal recommendations, representatives of the
Working Group (Philippe Tardif, Chair and Wayne Gray, Secretary and Gordon Raman) have
worked with legislative counsel to develop proposed draft legislation (in the form of a national
instrument to be adopted under applicable securities laws).

[5]    A representative of the Working Group notified the Secretary General of the Canadian
Securities Administrators of the Working Group’s report and its initiative in coordinating the
drafting of the national instrument.

Summary of Draft Legislation

[6]    A draft of the draft national instrument proposed for adoption by the Canadian Securities
Administrators is attached as Schedule B. A draft of the amendments to corporate legislation



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                        UNIFORM LAW CONFERENCE OF CANADA

(providing for an exemption from the relevant provisions of the statute for trust indentures which
comply with prescribed law, including the national instrument) is attached as Schedule C.

[7]     The proposed draft legislation is consistent with the trust indenture provisions of the
Canada Business Corporations Act (the “CBCA”). The draft national instrument addresses the
minimum requirements for trust indentures contained in Canadian corporate law (including the
CBCA), including the following:

Sections 1 and 2:       Interpretation and Application

[8]     The proposed national instrument would apply to a trust indenture if, in respect of the
distributions of debt obligations, the issuer files or is required to file a prospectus under securities
legislation.

Sections 3 and 4:       Classifications of trusts

[9]     The proposed national instrument would require a trustee appointed under a trust
indenture to be (i) incorporated under the laws of Canada or a province and authorized to carry
on business of a trust company; or (ii) organized and carrying on business under the laws of the
United States, a state or territory thereof, or permitted to act as trustee by the United States
Securities and Exchange Commission.

Sections 5 to 9:        Duties of Trustee

[10]    The proposed national instrument would require a trustee to provide certain documents to
holders of debt obligations.

Sections 10 to 13:      Duties of Issuer

[11]    The proposed national instrument would require an issuer to provide evidence of
compliance with the relevant trust indenture.

[12]    The draft amendments to the CBCA (attached as Schedule C) would provide that the
relevant provisions of the CBCA only apply to a trust indenture in respect of a distribution of
debt obligations in respect of which a prospectus is filed or required to be filed in Canada and the
trust indenture does not comply with a prescribed law. It is proposed that the draft instrument
would be recognized as “prescribed law”. The draft amendments also contemplate that the
Director appointed under the CBCA would have discretion to grant exemptions from the


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           UNIFORM AND SIMPLIFIED TRUST INDENTURE LEGISLATION

application of the relevant provisions of the statute on a case by case basis where such exemption
is not prejudicial to the public interest.

In Conclusion

[13]    The proposed instrument and proposed amendments to the CBCA are responsive to the
recommendations of the First Report. Members of the Working Group would be pleased to
continue to assist the ULCC in coordinating the next phases of the Uniform and Simplified Trust
Indenture Legislation project.



                                                                           Philippe Tardif




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  UNIFORM LAW CONFERENCE OF CANADA


                     Schedule A

http://ulcc.ca/en/poam2/index.cfm?sec=2010&sub=2010h




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UNIFORM AND SIMPLIFIED TRUST INDENTURE LEGISLATION




                          Schedule B
            [draft National Instrument to be attached]




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                    UNIFORM LAW CONFERENCE OF CANADA



                                         Schedule C

CBCA

Proposed amendments to the Canada Business Corporations Act (“CBCA”)

CBCA, ss. 82(1):

                    The definitions of “event of default” and “trustee” are deleted in their
                    entirety and replaced with the following:

                    “event of default” means an event specified in a trust indenture on the
                    occurrence of which a security interest effected by the trust indenture
                    becomes enforceable, or the principal, interest or other money payable
                    under the trust indenture becomes or may be declared to be payable before
                    maturity, once all conditions — such as the giving of notice or the lapse of
                    time — provided for by the trust indenture in connection with the event
                    have been satisfied.

                    “trustee” means any person appointed as trustee, including the
                    administrator of the property of others, under the terms of a trust indenture
                    to which a corporation is a party and includes any successor trustee.

CBCA, ss. 82(2) and (3):

                    Subsections 82(2) and 82(3) are deleted in their entirety
                    and replaced with the following:
             (2)    This Part applies to a trust indenture in respect of a
                    distribution of debt obligations in respect of which a
                    prospectus is filed or is required to be filed in Canada and
                    the trust indenture does not comply with a prescribed law.
             (3)    On application, the Director may exempt a trust indenture
                    from this Part on any terms that the Director considers
                    appropriate, if the Director is satisfied that the exemption
                    would not be prejudicial to the public interest.




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